GameStop is only worth 11 billion. Trying to buy a company worth 5x what they are…
They’re offering half cash (which they don’t have, because they’d be worth at least 25 bn if they did), no one is going to lend them that much money, because again, they don’t have the collateral to support it.
And they’re thinking they can sell more of their own stock to raise funds…diluting their current stock, which would require they sell 3x their present value in stock to acquire??? Diluting their current shares in the process.
Same way Kmart bought sears. It’s fairly common for smaller companies to buy larger ones at this point.
Remember the discovery ‘channel ‘ bought Warner brother whole ass media conglomerate and at the end of the deal the people who made that happen made 10’s of billions.
They have like $9B cash, and a note from TD for another $20B, which covers the cash half.
The stock half wouldn’t even really be dilutive, since they would add the balance sheet of eBay to their own, and eBay stock would cease to exist. There are currently something like 450M shares; assuming 1B new shares at $25B to facilitate the purchase, that’s 1.45B shares of a company with a market cap of $11B + $48B = $59B., which is roughly $40/share.
The debt is only $20B, even then it still works out to about where it’s trading now, so still not really dilutive. And it’s still under 50% leverage, which is honestly pretty typical for a large company. Assuming Cohen actually has a plan to boost profits, that debt isn’t particularly concerning.
Leverage buyouts are just a symptom of the problems in the system
In theory, leverage buyouts make perfect sense, kinda like a mortgage. You get a loan to buy something with that same as a collateral.
The fact that these usually ends in worse conditions for everyone is not because leverage buyouts are the problem, but the private ownership. Toys r’ us should have been owned by the workers, man utd by the fans, as so forth
I don’t understand how this deal can even happen
GameStop is only worth 11 billion. Trying to buy a company worth 5x what they are…
They’re offering half cash (which they don’t have, because they’d be worth at least 25 bn if they did), no one is going to lend them that much money, because again, they don’t have the collateral to support it.
And they’re thinking they can sell more of their own stock to raise funds…diluting their current stock, which would require they sell 3x their present value in stock to acquire??? Diluting their current shares in the process.
Same way Kmart bought sears. It’s fairly common for smaller companies to buy larger ones at this point.
Remember the discovery ‘channel ‘ bought Warner brother whole ass media conglomerate and at the end of the deal the people who made that happen made 10’s of billions.
They have like $9B cash, and a note from TD for another $20B, which covers the cash half.
The stock half wouldn’t even really be dilutive, since they would add the balance sheet of eBay to their own, and eBay stock would cease to exist. There are currently something like 450M shares; assuming 1B new shares at $25B to facilitate the purchase, that’s 1.45B shares of a company with a market cap of $11B + $48B = $59B., which is roughly $40/share.
They are diluting the value of eBay’s shares.
For what purpose? So they tie up with what is worthless junk stock ?
This will go nowhere.
Kinda, but not really. Each share becomes $56 and like 2 new shares. It’s more like a fat dividend than a dilution.
You should look into Cohen’s track record before assuming it’ll go nowhere.
There’s a debt of the other 25+ billion that gets added to them. That’s coming from somewhere, because it goes to eBay’s shareholders, not to eBay.
The debt is only $20B, even then it still works out to about where it’s trading now, so still not really dilutive. And it’s still under 50% leverage, which is honestly pretty typical for a large company. Assuming Cohen actually has a plan to boost profits, that debt isn’t particularly concerning.
All leveraged buyouts ought to be illegal, not just this one.
Leverage buyouts are just a symptom of the problems in the system
In theory, leverage buyouts make perfect sense, kinda like a mortgage. You get a loan to buy something with that same as a collateral.
The fact that these usually ends in worse conditions for everyone is not because leverage buyouts are the problem, but the private ownership. Toys r’ us should have been owned by the workers, man utd by the fans, as so forth